Senator seeks clarity on tax provisions of American Rescue Plan Act of 2021

Sen. Joe S. San Agustin (PNC file photo)

Senator Joe S. San Agustin wrote a letter to Secretary of the U.S. Treasury Secretary Janet L. Yellen, requesting her immediate action to interpret a provision of Section 9901 of the American Rescue Plan Act of 2021 and asking whether the provision restricts Guam from enacting and implementing basic tax policy.

“Provisions found in Section 9901 of the Act forbids States and Territories from utilizing COVID-19 relief funds to, ‘directly or indirectly offset a reduction in … net tax revenue’ resulting from state laws or regulations that reduce tax burdens-whether by cutting rates or by giving rebates, deductions, credits, or otherwise[.]”

San Agustin said this language may possibly be interpreted to deny Guam the flexibility to implement fiscal policy in the form of tax relief, even if such policy would have been provided with or without the prospect of federal COVID-19 relief funds.

“While the prohibition of the Act against “offsetting” reductions in our revenue is not clear, we understand that the provision may have been intended to prohibit States or Territories from taking COVID-19 relief funds and rolling such directly into a tax cut of equal or similar amount. We could also read the provisions to prohibit tax cuts or relief of any type in the prohibition on the indirect offset reductions in tax revenue as listed as prohibited types of tax reductions: rate cuts, credits, deductions, or’“otherwise’ regardless of its relation in whole or part to relief funds,” San Agustin stated in his letter.

Examples of local tax legislation that may render Guam ineligible for federal funding under the Act include:

· Relief to small businesses by giving a 2% tax break to businesses who earn $250K or less in gross receipts.

· Waiver of business license fees for 2 years.

· Legislative measures seeking to eliminate the gross receipts tax from 5% to 4% to assist all businesses recover from the pandemic.

· Legislation to repeal the assessment of gross receipts and use taxes on medical equipment and telemedicine technology.

· Legislation to create tax rebates for the purchase of personal protective equipment by families.

· Creation of grant programs for small business start-ups, displaced employee workforce incentives, and rental assistance for eligible families.

“The COVID-19 pandemic has wreaked havoc throughout the Nation and has assuredly put our residents in need of financial support. As a result, Congress’ foresight provided such support through this Act via the State and Territory governments. The people of Guam are in dire need of this assistance and we are in no position to reject this form of relief for our people. The assistance provided to Guam will ensure that our government continues to provide the services and programs needed to care for our residents while providing necessary financial support for families to make ends meet,” San Agustin stated.

(Senator Joe S. San Agustin Release)